Should private sector salaries be regulated?

One of my friends, an assistant commissioner of income tax in India, once told me an interesting story. A senior colleague of his who was posted in one of the Income Tax Department offices in Patna in the Indian state of Bihar, made the decision one fine day, while on the way to his office, to set out on a divine mission. It was a mission usually taken by prophets and saints: 'The search of Truth.' His job responsibilities flew from his mind and he went missing.

After about a six-year-long absence he showed up at the office one day - shabbily-clothed with a long saintly beard and dirty unkempt hair. When asked why he took the long sabbatical, the colleague replied, "I went in search of truth. My hunt is over."

This sudden urge to get closer to the almighty may have been the true reason for his absence - let's not suspect any other intention. His job was not necessarily to his liking. The file with his pink slip should have been gathering dust; however, he got his chair back and still has his position.

Contrast this with another friend of mine who is the general manager of exports with a steel-making giant in India. He works with a cumulative daily sales target. Every tonne he fails to sell is added to his next day's target.

By 36, he has high blood pressure, diabetes and insomnia, but that has not stopped the Indian Institute of Management rank-holder from taking the challenge head-on everyday. But he is successfully battling it out.

These two instances, one from the public sector and the other from its private counterpart, portray a clear picture of the sharp contrast between the two kinds of professional lives. They also give the reason for the striking difference in the salary packages in the two sectors. The public sector has always had a human face, but the compassion comes with a compromise on salary. The private sector, on the other hand, was always unforgiving but pays a premium for efficiency.

Somehow our Prime Minister, Manmohan Singh, does not like the difference. He believes corporate India must resist paying excessive remuneration to promoters and senior executives and reduce conspicuous consumption as it is "socially undesirable" and "environmentally unsustainable." A couple of months ago he had said Indian industry's success in wealth creation is worth celebrating, but showing off the riches through ostentatious parties is as good as insulting the less privileged and stoking social unrest. India cannot afford the wasteful lifestyles of the West, he had said, reminding the corporate sector that our country, despite its phenomenal growth, still faces the problem of scarce natural resources on a per-capita basis.

The Prime Minister's comments evoked fears of wage regulations in the minds of those who had chosen not to work for the government. Thankfully the fears were allayed by Finance Minister P. Chidambaram last week, who said salaries in the private sector should not be regulated. Addressing students of Mumbai University, he said the salary structure based in the public and private sectors can never be compared. The application of the risk-reward principle in calculating the remunerations of private sector employees is not done in the case of civil servants. He came out with concrete examples, pointing out that - except in Singapore - a government employee earns much less than his private sector counterpart across the world. A fund manager of ICICI Prudential Asset Management Co earns a lot, but he carries the risk of being fired.

It is high time the public sector employees start getting evaluated on the basis of their performance. If not, they should not envy the private sector's pay package for there are stories of blood and tears in them. Nothing comes for free.